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China: Country and Foreign Investment

Business Environment

As is the case in many non-Western cultures, the rule of law, which forms the bedrock of Western, and particularly Anglo-Saxon business relationships, is less than well-rooted in China, and this has been exacerbated, or even perhaps caused, by the authoritarian role of the State, which holds itself as being above the law, whatever the Constitution says, and certainly behaves that way.

Another consequence of the recent history of the Chinese is the dominance of 'the collective' in business situations. Collectives still exist as such, particularly in rural areas, but the mind-set imbued by the Chinese educational system runs deep, even when an apparently 'modern', hi-technology business is being run. Of course, if you are dealing with a western-educated Chinese, things may, but only may, be different.

A successful negotiation, and a successful business relationship, is therefore dependent on recognizing that a contract, while necessary and important, is only one aspect of the cultural nexus in which a foreign investor is operating. It may be difficult, also, to locate responsibility and decision-making power among the group of Chinese with whom you are negotiating or dealing.

Central to Chinese inter-personal culture is the concept of 'face'. In the collective, position is dependent on reputation, and nothing is more deadly to the self-esteem of a member than loss of face. A foreigner who is seen as the agent of such loss of face has committed a serious and possibly fatal error of negotiation.

While it may be difficult at first to understand the relative positions of individuals in the group with which you are negotiating or dealing, there are some pointers. It is highly probable that the members of a team will enter a room in the order of their relative importance, especially in the presence of a foreigner; and junior members of the team will constantly defer to their seniors in conversation and in bodily behaviour.

Due to the importance attached to 'face', business cards have much greater importance in China than in the West, where they have rather taken a back seat, and relative position among a group of Chinese will be reflected in the order in which they present their business cards, as well as on the cards themselves, if you can understand them! When presenting your business card, you should offer it with both hands; likewise, you should take a business card with both hands, study it carefully, and place it respectfully in a pocket or on the table in front of you.

Chinese names consist of a family name followed by 'first' or personal names. Thus Hu Jintao is Mr Hu. First names are only used by family members or close friends. In business, when a person has a title or position, it is customary to adress them with it, thus Chairman Hu. Married women normally retain their maiden names except in very formal situations.

It is normal to shake hands when meeting someone, but a nod or slight bow is also often appropriate, particularly for someone you already know. A handshake should not be very forceful; and it may last quite a number of seconds. It is rude to look straight into the eyes of a Chinese person; more proper would be a quick glance, and then lower the eyes as a sign of respect.


Apart from being a scenic region of southern China, the word means 'relationship', but it has deep resonance when it comes to getting things done. In China, more than most places, it's not what you know, but who you know. And how you know them. In order to succeed, a foreign investor or business partner will need to have close and appropriate relationships, not just with the government body and officials involved in the company formation and licensing process, but also with Chinese staff, suppliers, the tax office and other municipal authorities. Whereas in the West, business relationships can be conducted (if necessary) on a purely contractual basis ('you do your job and I'll do mine'), this will quite possibly be a counter-productive strategy in China. Mutual respect based on familiarity established over a long period is going to be the most successful basis for a harmonious business relationship.



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